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The Modern Artefacts Company proposes to invest 5 million in a new manufacturing plant for keepsakes. The plant that will depreciate on a straight-line basis.

The Modern Artefacts Company proposes to invest 5 million in a new manufacturing plant for keepsakes. The plant that will depreciate on a straight-line basis. Fixed costs are 2 million per year. A keepsake costs 5 per unit to manufacture and sells for 20 per unit. If the plant lasts for three years and the cost of capital is 12 percent, use the degree of operating leverage formula to estimate accounting break-even level of annual sales. You should assume there are no taxes.

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